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William Feather, an American publisher and author once said that, ‘one of the funny things about the stock market is that every time a person buys, another sell, and both think they are astute.’
Stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation.
Units of stock are called “shares” which entitles the owner to a proportion of the corporation’s assets and profits equal to how much stock they own.
Humble beginnings
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Stock trading in India goes back to the 18th century when the East India Company began trading in loan securities. Later in 1830s, corporate shares started being traded in Bombay with the stock of Bank and Cotton presses.
Stock exchanges in India began informally back in 1850s when 22 stockbrokers began trading opposite the Town Hall of Bombay under a banyan tree.
The Companies Act was introduced in 1850, following which investors started showing an interest in corporate securities. The concept of limited liability also put an appearance around this time.
The number of brokers continued to grow constantly shifting their locations to finally settle in 1874 at place that at present is called Dalal Street.
An informal group known as the Native Share and Stockbrokers Association organized themselves as the Bombay Stock Exchange (BSE) in 1875.
BSE is the oldest stock exchange in Asia and was the first to be granted permanent recognition under the Securities Contract Regulation Act, 1956
A series of stock exchanges
In 1894, the BSE was followed by the Ahmedabad Stock Exchange which focused on trading in shares of textile mills.
Shares of plantations and jute mills commenced being traded at the Calcutta Stock Exchange in 1908.
The Madras Stock Exchange followed, being set up in 1920
Post-independence scenario
Post- independence, BSE dominated the volume of trading. However, the low level of transparency and undependable clearing and settlement systems, increased the need for a financial market regulator
The Sensex or Sensitive Index was launched in 1986, followed by the BSE National Index in 1989.
In 1988, the Securities and Exchange Board of India (SEBI) was born as a non-statutory body, which was further given statutory status by passing SEBI Act on 30 January, 1992.
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National Stock Exchange (NSE) came into being in 1994. to cater to the need for another stock exchange large enough to compete with BSE and need for transparency in stock market.
NSE began operations in the Wholesale Debt Market (WDM) segment in 1994, the equities segment in 1994, and the derivatives segment in 2000.
In 1995, the BSE switched to an electronic trading system from the open-floor system.
In 2015, SEBI was merged with the Forward Markets Commission (FMC) to strengthen commodities market regulation, facilitate domestic and foreign institutional participation, and launch new products.
After the country gained independence, 23 stock exchanges were added apart from the BSE, but at present, there are only five recognized stock exchanges, apart from BSE and NSE:
– Calcutta Stock Exchange Ltd.
– Magadh Stock Exchange Ltd
– Metropolitan Stock Exchange of India Ltd
– India International Exchange (India INX)
– NSE IFSC Ltd
Current status of stock trading in India
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At present, the BSE is measured as the world’s 11th largest stock exchange, with market capitalization likely to be around $1.7 trillion.
The market capitalization of the NSE is estimated to be over $1.65 trillion.
The flagship benchmark index of BSE is called the Sensex and for NSE it is the Nifty50.
The exchanges are still on parity in terms of share trading volumes. Nowadays, people can conduct online trading sitting in their homes. Facilities such as zero brokerage Demat with live updates available.
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